Healthy Competition

With more fitness clubs opening in Greater Des Moines, which ones will thrive?

People who still have excuses about why they haven’t joined a fitness club in Greater Des Moines can’t say they lack choices.

With venues ranging from small-scale neighborhood clubs to turbocharged CrossFit programs or amenity-filled upscale spas, the selection of health and fitness clubs in Greater Des Moines has arguably never been more vast or varied than it is now.

The U.S. health and fitness club industry reached a new milestone in 2013, with more than 62.1 million Americans logging more than 5 billion visits. Memberships in health clubs increased by more than 5 percent in 2013 to 52.9 million people, according to the International Health, Racquet & Sportsclub Association (IHRSA), which tracks the fitness club market.

Health club members visited their clubs an average 103 days last year, an all-time high.

The intense competition means many clubs are dangling seven-day free trials to entice new members and offering monthly fees for as low as $10. On the other end of the spectrum, elite clubs are touting lifestyle amenities that include child care centers with extensive children’s activities and high-end spas.

Squarely targeting the highest income tiers of the U.S. fitness club market is Minnesota-based Life Time Fitness Inc., which in May opened its 166,000-square-foot Life Time Athletic center in Urbandale. The publicly traded company’s entry into the crowded Greater Des Moines market signals its confidence that its strategy of attracting and keeping high-end customers will succeed in Iowa.

An indicator of the intense competition locally was last month’s announcement by 7 Flags Fitness that it would close this summer. The 25-year-old Clive club, one of the largest facilities in the metro area, which at one time had one of the largest memberships, threw in the towel after a yearlong, multimillion-dollar effort by an out-of-state owner to revitalize the aging facility. Statewide, the number of fitness facilities declined 9.5 percent last year to 342 clubs, according to data from the IHRSA.

A key competitor with the surge of private clubs is the nonprofit YMCA of Greater Des Moines, which has been on a sustained growth trajectory with new facility expansions for the past several years. After opening new centers in Waukee and Indianola, the YMCA now has its high-profile Wellmark YMCA under construction downtown and is planning to build in Ankeny and Grimes as well.

According to research firm IBISWorld, no fitness company has a clear lead in the U.S. market, because so many operators have small niches with local clientele. Last year, the combined revenues of the top four fitness club chains made up just 13.9 percent of the industry’s total revenues.

Plethora of competition

The U.S. health and fitness club market is extremely fragmented, said Jeff Zweifel, chief operating officer of Life Time Fitness. The Algona native was in Greater Des Moines for a grand opening celebration last month for the Urbandale center, which is Life Time’s 111th facility nationwide.

“We always know that in our existing, mature markets, or in a new club expansion, that there’s going to be a plethora of competition,” he said. “We know there is literally no barrier to entry for most health club or gym operators, or now boutiques and studio operators. So there is a tremendous amount of fragmentation and growth going on in the market.”

In the midst of that fragmentation, a number of fitness club operations have migrated toward extremely low pricing, such as the $9.99 monthly fees offered by Planet Fitness and some other large franchise operators, he noted.

“That’s not a market that we traditionally want to participate in, because we can’t offer the best people, place and programs at that pricing strategy,” Zweifel said. “There’s a place for that competitor, and that’s a respected strategy. We know there is plenty of competition in the market, but we are just so confident that what we do and how we do it is so uniquely different in serving that specific top 20 percent of the marketplace. We know there will be more than enough customers in this demographic to exceed our needs.”

Life Time’s “user model” focuses on connecting with and engaging its members and retaining them, Zweifel said. “Our objective is to first connect and engage people with what they like to do,” he said. “And we do the same thing with our employees. One of our objectives is to have continuity of our team, so that when you come in a year from now, we have the same general manager, the same front desk people, the same salespeople. That’s what makes a great club.”

Life Time’s fitness centers brought in $1.2 billion in revenue last year, the majority of it from member access dues that range from $45 to $160 per month for individual memberships to $75 to $340 for family memberships, according to the company’s annual report. In-center amenities, such as personal trainers, spa services and cafes, accounted for 42 percent of its centers’ revenues last year.

Multiple fronts

The fastest-growing franchise operations have a solid foothold in Greater Des Moines, where the IHRSA estimates about one out of five residents has a health club membership. Anytime Fitness, which has 14 of its more than 2,000 North American franchise locations in Greater Des Moines, has opened at least 250 new clubs globally for each of the past six years and now has more than 2 million members in 19 countries. The chain, ranked No. 1 on Entrepreneur magazine’s annual Franchise 500 list this year, was expected to exceed $600 million in systemwide revenues last year.

Planet Fitness, which bills itself as the fastest-growing full-size health club chain in the United States, has more than tripled its number of club locations within the past five years. The company now operates 813 clubs nationwide, including Central Iowa locations in Urbandale and Des Moines, and it passed the 5 million-member mark in March.

The opening of Life Time Athletic was “not the nail in the coffin” for 7 Flags Fitness, said its general manager, Kyle Hamer.

“We were fighting on multiple fronts,” Hamer said. “First, there was so much damage and neglect from the previous ownership. Even after putting $1 million into it, you couldn’t see the million bucks, even though it was here.”

Market saturation was the other big battle for 7 Flags, which faced competition from 104 fitness facilities within a five-mile radius, by Hamer’s count. “Name any other industry other than fast food that has that kind of competition,” he said.

Aspen Athletic Clubs, which purchased the bulk of 7 Flags’ membership roster, was the club’s biggest competitor, Hamer said. Aspen bought about 3,300 of 7 Flags’ 4,000 memberships. “They were in a strategically better position than we were, with a larger footprint with multiple locations. They made more sense than anyone else in town to partner with,” Hamer said. “Strategically, it helps Aspen and strengthens them against Life Time.” Hamer said the property’s owner, A.J. McCann, is on solid financial footing and is seeking tenants for the shuttered fitness club property as he continues to operate the 7 Flags Event Center.

Y not more growth?

The YMCA of Greater Des Moines, which has more than doubled its membership in the past dozen years, isn’t trying to go head-to-head with the private marketplace. The YMCA currently has a new $30 million downtown facility under construction and plans for new branches in Ankeny and Grimes.

“Needless to say, this arena is becoming more and more competitive,” said CEO Vernon Delpesce, who acknowledged that the Y has lost some members to Life Time Athletic’s new facility. “We hate to lose them, but if they feel their needs are better met there, we certainly wish them well. I will say that during the month of May when Life Time opened, we had tremendous membership sales, far better than last May. So even though we’ve had some people leave us, it hasn’t diminished people joining the Y.”

The Greater Des Moines organization, whose membership ebbs and flows with seasonal interest, peaked at about 66,000 members in April and has been averaging about 65,000 since opening its new Indianola branch last year.

Delpesce emphasized that as a community-based charitable organization, the YMCA’s mission extends beyond health and fitness, which is important to many of its members.

“From our standpoint, we’re a very different organization than a private club or something such as Life Time,” he said. “We are a community-based charitable organization that focuses on youth development, healthy living and social responsibility. So health and fitness is an important part of what we do – the YMCA invented health and fitness – so it definitely is important to us, but it’s not the only thing we do.”

Another significant distinction for the Y is that it strives to be as affordable and accessible to as many people as possible, Delpesce said. “Out of those 65,000 members, one out of four receives some type of financial assistance to be a part of the Y. We don’t want a person’s financial status to be a barrier to them participating in the Y. And we’re able to support those one out of four because of the support we get from the community.” In the past year, the YMCA was supported by 4,600 individual donors, as well as United Way of Central Iowa and numerous corporate and foundation donors, he said.

As for future growth, Delpesce anticipates that the membership of the downtown Y will triple to 15,000, and he’s also expecting healthy growth in both Ankeny and Grimes, where it’s now planning new facilities.

The biggest challenge ahead?

“Having the resources available to us to do the capital expansion to best serve the community is probably our biggest challenge today,” Delpesce said. “Once we have that, members will come our way and we can serve them. But in order to keep our fees low and affordable to as many people as possible, you just have to have the resources to make that possible.”

Des Moines company provides social media referral tool for clubs

Jake Soll, CEO of Gyms on Demand LLC, a West Des Moines-based company that operates a social media referral site for fitness clubs, said he has observed a number of clubs go out of business or change hands in the past couple of years.

“The market now is very saturated,” he said. “When you get these Planet Fitness or Gold’s Gym locations with $10 memberships, it really draws people away from the larger facilities. They’re really just banking on that not all of their members will show up at one time.”

Soll’s startup company began as a consumer-oriented website, but as social media evolved, it has pivoted to offering a club-driven marketing tool.

Although most clubs are offering incentives such as free seven-day trials or one month free for referring a friend, many don’t have effective systems for tracking referrals, which is where his online program, shareyourfit.com, comes in.

Clubs that use the system get a custom-branded landing page on which members can refer their friends to the club. In one 90-day case study, a client had 543 free passes downloaded, with 28,000 social media impressions created from those passes, resulting in 163 new members signing up, Soll said.

“It’s been working great for health clubs, as long as they use it,” he said. “It’s creating impressions, versus a ‘spray and pray’ approach - sending out fliers and hoping someone’s interested in your facility.”